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Rating Action:

Moody's reviews Bally's Corporation (B2 CFR) for upgrade following announcement of merger agreement with Gamesys Group plc

15 Apr 2021

New York, April 15, 2021 -- Moody's Investors Service placed Bally's Corporation's (Bally) B2 Corporate Family Rating on review for upgrade along with its B2-PD Probability of Default Rating, Ba3 senior secured revolver and term loan ratings, and Caa1 senior unsecured rating.

The review for upgrade is in response to Bally's public announcement on 13-April that it entered into a definitive merger agreement with Gamesys Group plc (Gamesys) to acquire the entire issued and to be issued ordinary share capital of Gamesys.[1] Bally's obtained a US$2.378 billion 364-day bridge loan commitment that it will use to finance the non-equity portion of the merger.

The transaction is subject to shareholder approval of both Bally's and Gamesys along with the receipt of certain regulatory approvals. Moody's could conclude the review prior to the closing of the merger if operating conditions change materially, terms of the merger change, or there is greater clarity on the post-transaction capital structure.

Gamesys is the parent company of an online gaming group that provides entertainment to a global consumer base and is listed on the London Stock Exchange under the ticker symbol "GYS." The transaction is valued at US$3.16 billion, or about 11x Gamesys 31-Dec 2020 fiscal year-end adjusted EBITDA of $286 million.

The equity component of the merger includes a planned US$850 million common stock offering, net proceeds of which will be used to reduce the bridge loan. Additionally, holders of approximately 25.6% of Gamesys' issued ordinary share capital have committed to exchange their holdings for Bally's common shares as part of a share alternative made available to all Gamesys shareholders. In the share option, Gamesys shareholders can elect to receive 0.343 new Bally's common shares for each Gamesys share held in lieu of part or all of the cash offer. Gaming & Leisure Properties, Inc. (GLPI) has also agreed to purchase US$500 million of Bally's equity above and beyond the US$850 million planned equity raise.

On Review for Upgrade:

..Issuer: Bally's Corporation

.... Corporate Family Rating, Placed on Review for Upgrade, currently B2

.... Probability of Default Rating, Placed on Review for Upgrade, currently B2-PD

....Gtd Senior Secured Term Loan B, Placed on Review for Upgrade, currently Ba3 (LGD2)

....Gtd Senior Secured Term Loan B1, Placed on Review for Upgrade, currently Ba3 (LGD2)

....Gtd Senior Secured Term Loan Revolving Credit Facility, Placed on Review for Upgrade, currently Ba3 (LGD2)

....Gtd Senior Unsecured Regular Bond/Debenture, Placed on Review Upgrade, currently Caa1 (LGD5)

Outlook Actions:

..Issuer: Bally's Corporation

....Outlook, Changed To Rating Under Review From Negative

RATINGS RATIONALE/ FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Bally's existing B2 CFR reflects the company's positive free cash flow during periods of normal operation, and improved level of geographic diversification resulting from acquisitions during the past two year. Also supporting the rating is the company's significant cash balance, lack of meaningful maturities until 2024, and good cost management that is contributing to higher margins following facility reopenings. The earnings decline from facility closures and efforts to contain the coronavirus, and exposure to cyclical discretionary consumer spending also constrain the rating.

In the review for upgrade, Moody's will evaluate the strategic and operating benefits to Bally's from the merger including Gamesys' technology platform and expertise with respect to online gaming. The merger will enable Bally's to capitalize on the full range of gaming opportunities available both in the US and beyond as it broadens the company's revenue streams and enables it to quickly enter new and evolving gaming environments. The review also considers the significant amount of equity that will be used to fund the merger and the resulting potential for Bally's leverage to decline due to the transaction.

The favorable credit considerations mentioned above will be balanced by Moody's concern that the merged entity's actual EBITDA performance remains vulnerable to any additional coronavirus- related shutdowns, increased social distancing requirements, or pullbacks in discretionary consumer spending, should they occur. For this reason, there remains some degree of uncertainty with respect to the combined entity's ability to achieve and sustain debt/EBITDA below the 5.0x upgrade fact. Based on the planned equity components of the merger, and applying a pro forma combined EBITDA amount US$587 million that is inclusive of a full year of results for acquisitions completed throughout FY2020, pro forma debt-to-EBITDA leverage of 4.8x is only slightly below our current upgrade debt-to-EBITDA leverage factor of 5.0x debt/EBITDA. As part of the review, Moody's will assess whether an improved operating profile provides greater free cash flow and financial flexibility to manage with higher leverage than Bally's prior to the transaction.

Ratings could be upgraded if the transaction components including equity funding are executed as planned, the EBITDA performance of Bally's improves, and Gamesys' EBITDA continues to perform at or better than current levels. Moody's would also need to be confident that the gaming sector will continue to recover from the coronavirus. In addition, the company would need to maintain debt-to-EBITDA below 5.0x, meaningfully positive free cash flow, and at least good liquidity to be upgraded.

While less likely due to the review for upgrade, the ratings could be downgraded if Bally's earnings do not recover as expected in 2021 or competition or other operating issues weaken Gamesys' earnings prospects. A deterioration in liquidity or other leveraging actions could also lead to a downgrade.

Bally's Corporation (NYSE: Baly) owns and operates casinos in the US. The company currently owns and manages 12 casinos across 8 states, a horse racetrack and 13 off track betting licenses in Colorado. Following the completion of pending acquisitions, as well as the construction of a land-based casino in Centre County, PA, Bally's will own 15 casinos across 11 US states. Revenue and EBITDA for the company's FYE 31-Dec 2020 was US$373 million and $US71 million, respectively.

Gamesys Group, plc is the parent company of an online gaming group that provides entertain to a global consumer base and is listed on the London Stock Exchange under the ticker symbol "GYS." Revenue and EBITDA for the company's FYE 31-Dec 2020 was US$727 million and $US206 million, respectively.

The principal methodology used in these ratings was Gaming Methodology published in October 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1244702. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

REFERENCES/CITATIONS

[1] Form 8-K (SEC) 13-Apr-2021

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Keith Foley
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

John E. Puchalla, CFA
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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